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Deploy Nifty modified call butterfly spread strategy: Shubham Agarwal

With decline in India VIX, considering the positive momentum in Nifty, the upcoming week can be approached with a low-risk strategy like Nifty butterfly strategy using calls with modification.

SHUBHAM AGARWAL | 31-May-21
Reading Time: 3 minutes

After the strong upside move in the week ended May 21, Nifty touched a fresh all-time high i.e. 15,469.65, in spot. Another milestone added to the list.

The Nifty futures during this week ranged from 15,150 to 15,500, ending the week by gaining around 1.79 percent. On the OI (open interest) front, OI Unwinding witnessed over the week gone.

While Bank Nifty underperformed Nifty last week and closed at 35,380. Bank Nifty over the week gyrated between 34,434 and 35,670. On the OI front, unwinding was witnessed over the week gone by.

Further diving into the Nifty's upcoming weekly expiry Put writers are showing aggressions by building more position compared to call writers. Immediate and vital support stands at the 15300 levels where nearly 25L highest among all. On the upper side, 15500 stands at the vital resistance level.

Looking at the Bank Nifty's upcoming weekly expiry data. On the upper side, Immediate resistance stands at 35500 (9.5L share) followed by 36000 (9.48 L shares). Whereas, on the downside, 35000 (9.59 L shares) stand at the immediate support level and followed by 34500 (7.75 L shares) as the vital support level.

INDIA VIX, fear gauge, eases nearly 9 percent from 19.13 to 17.36 over the week. India VIX is trading at the lowest point since Feb 2020. Cool off in the IV has given relaxation to the market. Further, any downticks in INDIA VIX can push the upwards momentum in Nifty.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 1.385 to 1.316. Bank Nifty OIPCR over the week decreased from 1.067 to 0.753 compared to last Friday. Overall data indicates more of Put writers over call writers in Nifty & Bank Nifty.

Moving further to the weekly contribution of sectors to Nifty. Most of the sectoral indices have contributed positively except power, pharma and metal. OIL has contributed nearly 86.63 points in the Nifty 270 points gains. Followed by IT & PVTB approximately 77 and 41 respectively. Whereas Metal contributed nearly 8 points negatively.

Looking towards the top gainer & loser stocks of the week in the F&O segment. CONCOR topped by gaining over 14.1 percent, followed by PNB 11.4 percent, Mindtree 11.2 percent. Whereas, BEL has lost over 7.2 percent, Chola Fin 6.2 percent, Torrent Power 6.1 percent over the week.

Conclusion:

Considering the positive momentum along with a decline in India VIX, an upcoming week can be approached with a low-risk strategy like Modified Call Butterfly in Nifty.

Learn and read more about nse ban list from Quantsapp classroom which has been curated for understanding of nifty open interest from scratch, to enable option traders grasp the concepts practically and apply them in a data-driven trading approach.

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SHUBHAM AGARWAL is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.

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